May 22, 2023
There is a lot of truth in the saying “The truth often lies somewhere in the middle.” It certainly applies to the 2023 Indiana General Assembly and taxes.
Some looked for drastic relief for high property taxes. Increases in home value assessments based on the real estate market over the past couple of years sent tax bills soaring for many homeowners. When the Legislature elected not to grant immediate relief in ’23, critics had a field day. Listening to popular talk show hosts, the takeaway was that the Legislature did nothing for tax relief.
That’s not so, asserts Jeff Cummins, director of state government relations for Indiana Farm Bureau Inc. Perhaps the Legislature didn’t do what some people wanted, but it did act. Some of those actions will show up in tax savings for homeowners for taxes payable in 2024. Other actions help clear up some tax issues for agriculture.
“We didn’t get everything we wanted based on changes we lobbied for on behalf of the priorities outlined by our members, but we definitely made progress,” Cummins says. “Increased assessment will hit agriculture hard down the road. We need to stay vigilant and pay attention to tax issues all the time.”
Here are key actions in ’23 related to taxes:
Property tax relief. What passed was a supplemental deduction for homeowners with assessed valuation of $600,000 or less for property taxes payable in ’24 and ’25. This doesn’t offer relief for property tax bills due this year, but some sources estimate it could reduce the property tax bill for the average homeowner by around $100 per year for both ’24 and ’25.
More TIF district transparency. In theory, when assessed valuation goes up due to appreciation in existing property, the tax rate should go down so agencies still raise the same amount of money, not counting for budget increases. In reality, assessed valuation went up, but tax rates for many taxing agencies didn’t go down. As a result, you pay higher property taxes.
Cummins believes tax increment financing (TIF) districts, set up to spur economic development, may be impacting the equation. Money collected by TIF districts is not available to local taxing entities, like school districts.
“There is about a billion dollars in tax money going into TIF districts instead of going to local taxing units,” Cummins explains. “If a taxing unit can’t count on that money, it can’t lower the tax rate. Instead, it must raise enough money to meet its budget based on assessed value outside the TIF district.”
Until now, how TIF districts used funds wasn’t well documented. One bill passed this year should create more transparency within TIF districts. It requires more transparency in reporting funds. Cummins is hopeful this eventually will help local taxing agencies get a better handle on how to adjust rates.
Sales tax and agriculture. You buy a lawn mower or UTV, used for both farming and pleasure. Are they exempt from sales tax? “This has always been a gray area,” Cummins says. “The state uses a double test standard: The tool must be used in ag production and used over half the time for agriculture.
“We did get some clarification. If the predominant use is agriculture, it should be exempt. It’s not as clear as we wanted, but we will keep working on it.”
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